NFC a killer app? No Flipping Chance

It's got 99 problems and the chip ain't one

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According to my esteemed colleague Patrick Goss, NFC is the killer app for the smart watch. I love his vision of the future, which sounds rather like the lifestyle of the humans in Wall-E, but I think he's being far too optimistic with his predictions of waggly-wristed m-commerce that renders the physical wallet obsolete.

I reckon NFC is like jetpacks or flying cars: something we're constantly told is just around the corner and which never quite arrives.

I need to stress that by "NFC" I don't mean NFC technology. That's great: the NFC we use to share stuff between phones or to pair devices is just dandy.

I mean NFC payments, which is a clown show, has been a clown show for years and looks likely to remain a clown show for the foreseeable future.

Firms have been trying to crack the mobile payments market for a long time. Natwest had FastPay in 2005. Citigroup, Mastercard, Cingular and Nokia were pushing the NFC-based "Tap & Go" in 2006. In 2008 Visa had PayWave, Mastercard PayPass, American Express ExpressPay.

Google joined the party in 2011. They've all flopped. According to Bloomberg BusinessWeek, Google Wallet has cost over $300 million and has been downloaded fewer than 10 million times - and Google loses money on every single transaction.

The problem with payments

There are multiple problems with NFC payments and they aren't technological. First up: too many cooks.

NFC involves not just hardware and software firms but phone networks and payment service providers too, and everybody wants a slice of the mobile payment pie (Google excepted: it just wants to know what everybody's buying in shops).

That means retailers face not only the cost of upgrading to NFC-capable tills, but higher per-transaction costs too, and that is a big, big problem when high street shops are fighting for survival. If you've ever wondered why so few retailers seem keen on contactless payments, that's a big part of it.

There's also the issue of multiple competing platforms: Google Wallet, Visa's PayWave, MasterCard's Masterpass, Verizon, AT&T and T-Mobile's Isis and so on, not to mention non-NFC options such as PayPal or Square. In some cases stakeholders in one platform will block rivals - for example AT&T blocks Google Wallet.

There's also the fact that some retailers haven't even embraced chip and PIN, aka EVM, yet - especially in the US. Various card issuers have announced "liability shifts" in America (after which retailers will pay the price for fraud if they don't use EVM) for dates between 2015 and 2017; the EU had the liability shift in 2005, which is why Chip and PIN is everywhere in Europe

NFC fans hope that when those retailers upgrade their point-of-sale systems in the coming years, they'll go for NFC too, but that's by no means a safe bet if it'll still cost more to accept NFC payments than to take traditional card payments.

The biggest problem of all, however, is that NFC payments aren't solving a big problem.

What do NFC payments do that's so much better than plastic cards? Where are the crying masses at the supermarket tills demanding freedom from the tyranny of tapping four digits? What's the advantage of waving your phone or smartwatch around to find the sweet spot instead of going tap-tap-tap-tap?

NFC's many problems are surmountable, of course, but for now it seems awfully like a solution looking for a problem. As Bob1974 brilliantly puts it on the Guardian website: "I estimate I'd be able to save about 4 seconds every week with contactless technology. But I'd lose 5 seconds deciding how I should spend those 4 seconds."